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TonyTax, Tax Consultant
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Hi, I bought a UK house in 2002. My wife owes an appartment

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Hi, I bought a UK house in 2002. My wife owes an appartment in Russia. Now she is going to sell it. Is she supposed to pay taxes in the UK? (According to new regulations it seems she is UK resident)

Can you tell me how long your wife has been living in the UK please. Is it her intention to bring the money from the disposal of the apartment in Russia to the UK? Was it ever her main home? Has it been let?
Customer: replied 3 years ago.

We live here since 2002 and she wants to bring money to the UK. The apartment at Russia is owed by her and is her main home, it has been never let


Leave this with me while I draft my answer. There is a fair amount to get through so please bear with me. You don't need to reply to this post unless I ask for more information and you may receive reminders from just answer to respond even if I have not asked for information. Ignore them. I have all the information I need.

Hi again.

You should refer to HS283, RDR1, RDR3 and the UK/Russia tax treaty as part of this answer.

A married couple can only have one main residence between them at the same time.

Assuming your wife is a UK resident and if she has lived in the UK permanently since 2002 she will be, then she is liable to UK taxes. However, as she is not UK domiciled, she has a choice as to whether she is taxed on the money from the sale of the Russian property as follows:

1 She can choose to be taxed the same way as a UK domiciled individual, ie on her worldwide income and gains as it arises with credit being given for foreign tax paid against her UK tax liability on the same income.

2 She can choose to be taxed on her UK source income and on remittances to the UK of foreign income and gains and not on those income and gains she leaves outside the UK. As she appears to have been resident in the UK for at least 7 of the 9 previous tax years and possibly 12 of the previous 14 tax years, if she chooses to be taxed on this basis she will have to pay the remittance basis charge of £30,000 or £50,000. It may be less expensive to pay the UK Capital Gains Tax. See section 9 of RDR1.

The remittance basis of assessment really only works for the seriously wealthy and not those with one off windfalls such as the sale of their former home.

As far as UK CGT is concerned, your wife will qualify for a deduction from the gain covering the period she lived in it as her main home and a maximum of the last 18 months of ownership if it was not . Refer to HS283 for more information on this. It has some good example calculations. The first £11,000 of gains made by an individual in a tax year are tax free.

Article 13 of the UK/Russia double tax treaty covers capital gains. Any tax paid in Russia on the gain from the sale of the property will be deductible from any liability to CGT in the UK on the same gain. Article 22 covers double taxation.

I hope this helps but let me know if you have any further questions.

Customer: replied 3 years ago.

Could we claim our foreign house to be our main residence to get the tax relief?

You referred to the Russian property as your wife's home, ie owned by her not you, in which case you personally don't own two homes.

Unless you made an election within two years of acquiring a second home, the CGT position will be based on the facts, ie here you spent most of your time. There is more information on private residence relief here. Even if you could make an election now, it wouldn't cover most of the period the Russian property has been owned to date.

The government intends to withdraw the main residence election with effect from 6 April 2015.

The part of first sentence in the second paragraph after the comma should read "where you spent most of your time".
Customer: replied 3 years ago.

Sorry, maybe you did not receive my last question. Is it really important in this story that my wife is UK resident?

I dion't get that last question.

Residence is the main factor that determines liability to CGT in the UK. A non-resident does not pay UK CGT on the disposal of UK assests but they will be so charged after 5 April 2015 on gains made on the disposal of UK residential property.

If you wife was a non-UK resident when she sold the Russioan apartment, she may escape UK CGT. However, there are anti-avoidance rules which you can read here.
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